Wells v. Chevy Chase Bank, F.S.B.

BELL, Chief Judge. In this case, we are asked to resolve whether a credit-card agreement (the “Cardholder Agreement”), between Dale Wells, Sharon Goldenberg and John Dovel, the appellants, and Chevy Chase Bank, F.S.B. and U.S.A. Bank, N.A., the appel-lees, contractually bound the appellees to comply with provisions of Subtitle 9, which address the form of the notice required when a Cardholder Agreement is amended, where the Cardholder Agreement in the section captioned “Governing Law,” references Subtitle 9 of the Commercial Law Article, Md.Code (1975, 2000 Repl.Vol.), §§ 12-901 — 12-924 of the Commercial Law Article (“Subtitle 9”) and “applicable federal law.” Although the parties agree that State laws purporting to regulate the appellees’ lending activities have been preempted by § 5(a) of the Homeowners Loan Act (“HOLA”) 12 U.S.C. 1464(a) and its implementing regulations, see 12 C.F.R. pt. 560, the appellants characterize the reference to Subtitle 9 in the Cardholder Agreement as a provision in a ²⁰⁰ contract, which, notwithstanding federal preemption, defines a particular aspect of the relationship between the parties, the manner in which notice is to be given when the Cardholder Agreement is amended. Consequently, rather than because it was a failure to comply with state law, the appellants seek to recover damages from the appellees for breach of their contract with the appellants to comply with Subtitle 9 when amending the Cardholder Agreement. The Circuit Court for Baltimore City observed that it “seems both implausible and inconsistent with federal preemption to claim that a state regulatory scheme was agreed to between [the] parties by a mere reference to Subtitle 9” and, thus, rejected the appellants’ argument.

We do not agree. Accordingly, we shall reverse and remand the case to the Circuit Court for further proceedings. I. This is not the first occasion on which this case, the parties to it and the issues presented by it, have been before this Court. Wells v. Chevy Chase Bank, F.S.B., et al., 363 Md. 232 , 768 A.2d 620 (2001) (“Wells I ”) was an appeal taken from an order compelling arbitration.

Preparatory to addressing the substantive issue that case presented, whether the appellants agreed to arbitrate, we summarized the factual and procedural history of the case: “Plaintiffs’ first amended complaint alleges that the Defendants, in a number of aspects, breached the open end credit agreement (the Cardholder Agreement) in effect between Plaintiffs, as cardholders of credit cards issued by Chevy Chase, and Chevy Chase, as card-issuing credit grantor. “Prior to January 16, 1996, Chevy Chase had maintained its home office in Maryland. 1 The Cardholder Agreement provided for an annual fee, a minimum late charge fee of fifteen ²⁰¹ dollars, described the method of computing the finance charge, and stated that the ‘ANNUAL PERCENTAGE RATE will never exceed 24%’ With respect to amendments the Cardholder Agreement read: ‘We may amend the terms of this Agreement in accordance with applicable law at any time. Also we may at any time add new credit services, discontinue any credit services, or replace your card with another card.’ “The Cardholder Agreement also contained a ‘Governing Law’ provision reading: ‘This Agreement is made in Maryland. It is governed by Subtitle 9 [‘Credit Grantor Revolving Credit Provisions’] of Title 12 [‘Credit Regulations’] of the Commercial Law Article of the Maryland Annotated Code and applicable federal laws.’ “There was no mediation or arbitration provision in the Cardholder Agreement. “On or about January 16, 1996, Chevy Chase moved its home office to Virginia. With the periodic statements mailed in January and February of 1996 to its cardholders, Chevy Chase included a notice of change of terms of the Cardholder Agreement.

The notice of change took the form of a restatement and revision of the Cardholder Agreement, with the new or revised terms italicized and, with respect to a waiver of jury trial provision, both italics and all uppercase print was used. Solely for purposes of this appeal, and without indicating any opinion on whether the Cardholder Agreement was effectively amended or whether the amendments are substantively valid, we shall call the product of the January and February mailings the ‘Amended Agreement.’ The Amended Agreement provided that it was made in Virginia and was ‘subject to and governed by Virginia law and applicable federal law and regulations.’ The Amended Agreement further recited that ‘[t]he parties agree that by engaging in activities with or involving each other, they are participating in transactions involving interstate commerce.’ ²⁰² “Also contained in the Amended Agreement was an alternative dispute resolution section which in relevant part reads: ‘Mediation and Arbitration — Any controversy or claim (“Claim”) between or among you and us or our agents, employees and affiliates, including but not limited to those arising out of or relating to this Agreement or any related agreements, including without limitation any Claim based on or arising from an alleged tort, shall, at the request and expense of the claiming party, be submitted to mediation, using the rules of the American Arbitration Association (“AAA”).’ ‘If mediation fails to resolve the Claim within 30 days from the date of engagement, then the Claim shall be determined by binding arbitration. (Mediation or Arbitration, as appropriate, are sometimes referred to below as the ‘Proceeding’.) Arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S.Code), notwithstanding any choice of law provision in this Agreement, and under the rules of the AAA. Either you or we may, by summary proceedings (e.g., a plea in abatement or motion to stay further proceedings), bring an action in any court having jurisdiction for the sole purpose of compelling compliance with these mediation and arbitration provisions.’ “On or about September 30, 1998, First U.S.A. 2 purchased the credit card portfolio of Chevy Chase. “Plaintiffs instituted the ... action [in Wells I ] in January 1999.

They allege that the defendants breached the Cardholder Agreement by charging interest in excess of twenty-four percent, by increasing the interest on past balances, by failing to provide legally required notice of the amendments, by changing the method of calculating the finance charge without proper notice, and by increasing the late fees and over-limit fees without proper notice. Plaintiffs also allege violation of the Maryland Consumer Protection Act, Mary ²⁰³ land Code (2000 Repl.VoL), §§ 13-101(d) and 13-303(3) of the Commercial Law Article (CL).” Wells I, 363 Md. at 235-37 , 768 A.2d at 621-22 (footnote omitted). This history applies as well to the case sub judice. The Court identified the principal theory of the appellants’ case as being that the Cardholder Agreement had not been effectively amended and elucidated the supporting rationale underlying it: “Plaintiffs principally rely on CL § 12-912 that addresses amendment of the agreement governing a revolving credit plan.

In broad strokes, that section requires, ‘at least 25 days before the effective date of the amendment,’ a clear and conspicuous written notice, ‘if the amendment has the effect of increasing the interest, finance charges, or other fees and charges to be paid by the borrower ... or altering the manner of their computation.’ § 12-912(b)(1). The notice must include ‘[a] clear statement comparing the original terms and the terms under the amended agreement.’ § 12-912(b)(1)®. The initial notice is also to include ‘a statement that a second notice will be sent in the borrower’s next periodic statement.’ § 12-912(c)(7). Both notices are to be in ten point type.

Id. The notice is to advise of the cardholder’s optional right to refuse the amendment and to describe the manner of refusing. § 12-912(c)(7)(ii). Where, as here, the plan charges an annual fee, rejection of the amendment entitles the cardholder to ‘use the account pursuant to its original, unamended terms, for ... the duration of the time for which a fee was paid for use of the plan.’ § 12-912(c)(5)(i)1. “In addition, § 12-912(e) provides: ‘If the terms of the agreement governing the plan, as originally drawn or amended!,] provide, any amendment may, on or after the date on which it becomes effective as to a particular borrower, apply to all then outstanding unpaid indebtedness in the borrower’s account under the plan, including any indebtedness which shall have arisen ²⁰⁴ out of purchases made or loans obtained prior to the effective date of the amendment.’ “ Wells I, 363 Md. at 237-38 , 768 A.2d at 622-23 . We noted, that in addition to moving to compel arbitration, the appellees also argued in the trial court that § 12-912, on which the appellants principally relied, was preempted by 12 C.F.R. § 560.2 (a), a regulation of the Office of Thrift Supervision (OTS) that undertakes to “occupy[] the entire field of lending regulation for federal savings associations.” Id.

As indicated, the motion to compel arbitration prevailed in the trial court, prompting the appellants’ appeal. In response, the appellees moved to dismiss the appeal, arguing that the Maryland law permitting an appeal from an order compelling arbitration was, itself, preempted by 9 U.S.C. § 16 (b)(2) of the Federal Arbitration Act. This preliminary procedural issue, see Wells I, 363 Md. at 235 , 768 A.2d at 621 , was premised on the fact that the arbitration order “ ‘was entered in the context of a larger breach of contract dispute, the arbitration issue was ‘embedded’ in appellants’ contract and state statutory claims, and therefore the Arbitration Order is not an appealable ‘final decision’ for purposes of FAA § 16.’ ” Wells I, 363 Md. at 242 , 768 A.2d at 625 , quoting the appellees’ brief, which cited In re Pisgah Contractors, 117 F.3d 133 , 136 (4th Cir.1997). 3 ²⁰⁵ The Court resolved both the preliminary procedural issue and the substantive issue in favor of the appellants and, thus, reversed the judgment of the Circuit Court. As to whether the parties agreed to arbitrate, it reasoned: “The arbitration clause in the Amended Agreement in this case is susceptible of but one reasonable interpretation.

The promise is to mediate and, if necessary, arbitrate ‘at the request and expense of the claiming party.’ The Plaintiffs are the claiming parties, not the Defendants. This conclusion is neither altered, nor the language made ambiguous, by the provision in the next following paragraph reading: ‘Either you or we may, by summary proceedings (e.g., a plea in abatement or motion to stay further proceedings), bring an action in any court having jurisdiction for the sole purpose of compelling compliance with these mediation and arbitration provisions.’ Ordering the claiming party to mediate and, ‘if mediation fails’ to arbitrate, when the claiming party has not requested mediation does not compel compliance with the mediation and arbitration clause provisions; rather, an order so compelling exceeds those provisions.” Wells I, 363 Md. at 251-52 , 768 A.2d at 630 . 4 Therefore, the issue we resolved in Wells I, related solely to whether “the appellants ... agreed to arbitrate,” 5 id. at 235 , ²⁰⁶ 768 A.2d at 621 . This was an issue related to, but different from the issue the parties principally argued which was whether the appellees’ attempt to amend the Cardholder Agreement was effective. Although, the gravamen of the complaint in Wells I, as it is in the case sub judice, centered on that latter question, this Court did not address it.

Indeed, we expressly did not venture an opinion as to “whether the Cardholder Agreement was effectively amended or whether the amendments are substantively valid.” Id. at 236 , 768 A.2d at 622 . On remand, the question of whether arbitration was a requirement having already been decided was squarely before the court for resolution. As they had done in the earlier action, the appellants argued that the Cardholder Agreement had not been amended effectively and that the appellees, therefore were in breach of the contractual terms of the unamended Cardholder Agreement. Once again, the appellants relied on the Governing Law provision of the Agreement, emphasizing that provision’s reference to “Subtitle 9 of Title 12 of the Commercial Law Article of the Maryland Annotated Code.” The Circuit Court for Baltimore City, agreeing that appellants’ claims are preempted by federal law, granted the appel-lees’ motion to dismiss.

It opined: “[I]t is both ingenuous, and a trifle disingenuous to, to admit that the specific state imposed notice restrictions are preempted by federal law, while at the same time contend that the general reference to Maryland law, as the governing law, specifically reincorporates into the Cardholder Agreement these provisions as private agreements. It seems both implausible and inconsistent with federal preemption to claim that a state regulatory scheme was agreed to between the parties by the mere reference to Subtitle 9. ²⁰⁷ This is a great deal beyond the scope of preserving the traditional infrastructure of state laws that undergird commercial transactions. [[Image here]] “This court is convinced that to permit [appellants] to thwart the admitted preemption of the relevant law solely because of a general reference to Maryland law, flies in the face of common sense and contract interpretation. When the parties mentioned Subtitle 9 [of Title 12] of the Maryland Code and “applicable federal law” as governing law, they did not incorporate the protections of a Maryland regulatory scheme into the agreement. Had they meant to do that, they could have done so in clear-cut terms.

As the Chaires [v. Chevy Chase Bank, 131 Md.App. 64 , 748 A.2d 34 (2000), cert. denied, 359 Md. 334 , 753 A.2d 1031 (2000),] case makes clear, they could not waive federal preemption and could only have intended that state law apply as ‘governing law' should ‘federal law' not apply. There is no basis for claiming that they entered into a private agreement incorporating a complex and detailed state regulatory scheme.” The appellants noted an appeal to the Court of Special Appeals and this Court issued, on its own initiative, a Writ of Certiorari, Wells v. Chevy Chase, 369 Md. 570 , 801 A.2d 1031 (2002), prior to any proceedings in the intermediate appellate court. Although, the appellants agree that Subtitle 9 is preempted by HOLA and its implementing regulations, they nevertheless insist that the appellees’ agreement to comply with that subtitle’s relevant notice provisions and protections may still be enforced. The appellants argue, in other words, that while Subtitle 9 may not be invoked to evaluate the adequacy of a credit agreement where there is no agreement by the parties as to its applicability, when there is such an agreement, federal preemption cannot negate the appellees’ promise.

They rely on American Airlines v. Wolens, 513 U.S. 219, 228-29 , 115 S.Ct. 817, 823-824 , 130 L.Ed.2d 715, 725-726 ²⁰⁸ (1995), which they submit stands for the proposition that parties to a commercial transaction may elect, as a self-imposed, voluntary undertaking, to follow otherwise preempted state law and thus preserve state law claims for breach of contract. The appellants also find support for their position in 12 C.F.R. § 560.2 . Section (c) of that regulation exempts, inter alia, contract and commercial laws “to the extent that they only incidentally affect the lending operations of Federal savings associations or are otherwise consistent with the purposes of paragraph (a) of this section.” Consequently, they argue that the claims they advance have been expressly excluded from the preemptive scope of HOLA and the OTS regulations. The appellees rejoin that the appellants have misinterpreted the governing law provision of the Cardholder Agreement.

Specifically, they characterize the appellants’ argument that the parties agreed to a notice regime prescribed by an otherwise preempted statute as an “attempt to impose Subtitle 9’s preempted regulatory requirements on Chevy Chase through the back door of the choice-of-law provision in the Cardholder Agreement.” The appellants’ contract claim would not exist, they argue, if the requirements of Subtitle 9 are not imposed on Chevy Chase. Furthermore, they submit that a mere reference in the ‘governing law” provision of the Cardholder Agreement is insufficient to transform a preempted state law into a private contract. With respect to the exception to preemption recognized in 12 C.F.R. § 560.2 (c), they point out that, in 61 Fed.Reg. 50951, 50966 (1966), the OTS noted the narrowness of the exception: “OTS wishes to make clear that the purpose of paragraph (c) is to preserve the traditional infrastructure of basic state laws that undergird commercial transactions, not to open the door to state regulation of lending by federal savings associations.... For these purposes, paragraph (c) is intended to be interpreted narrowly.

Any doubt should be resolved in favor of preemption.” The appellees rely on Chaires v. Chevy Chase Bank, 131 Md.App. 64 , 748 A.2d 34 , cert. denied, 359 Md. 334 , 753 A.2d ²⁰⁹ 1031 (2000), which they contend rejected the precise argument, on virtually identical facts, being made by the appellants. It also was correctly decided, they maintain. The appellants’ reliance on the Supreme Court’s holding in Wolens is rejected by the appellees as being “unsupported by an analysis of the holding in that case.” Contending that, if relevant, it supports their position, the appellees argue (citing Wolens, 513 U.S. at 233 , 115 S.Ct. at 826-827 , 130 L.Ed.2d at 728-729 ) “[t]he Supreme Court held in Wolens that claims based on state laws or policies external to a contract, as opposed to the express terms of the contract, are preempted by governing federal law.... [The appellants’] claims in this case are premised entirely on the terms of Subtitle 9, all of which are external to the Cardholder Agreement itself. Thus, those claims are preempted.” II.

The federal preemption doctrine has its origin in the Supremacy Clause of the United States Constitution. See, U.S. Const., Art. VI, cl. 2. That Clause provides: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding.” The constitutional mandate imposed on this Court by the Supremacy Clause requires this Court to declare state law unenforceable to the extent that federal law expressly so provides or the circumstances indicate that federal law super-cedes state law. The rules governing preemption are well settled. 6 Preemption may occur in one of three ways.

Where Congress ²¹⁰ has expressly stated its intent to preempt state law, federal law prevails. Law v. Int’l Union of Operating Engineers Local No. 37, AFL-CIO, 373 Md. 459, 467 , 818 A.2d 1136, 1141 (2003) (citing Harrison v. Schwartz, 319 Md. 360, 364 , 572 A.2d 528, 530 , cert. denied, 498 U.S. 851 , 111 S.Ct. 143 , 112 L.Ed.2d 110 (1990)); see also, Becker v. Litty, 318 Md. 76, 86 , 566 A.2d 1101, 1106 (1989). Preemption of state laws also may still occur, even where Congress has not expressly stated its intention in that regard, if there is evidence of Congress’ intent to “occupy a given field,” and the state law falls within that field. Harrison, 319 Md. at 364 , 572 A.2d at 530 .

Finally, state law is preempted when “compliance with both federal and state law is a physical impossibility.” Law, 373 Md. at 466-67 , 818 A.2d at 1141 (2003) (citing Sanders v. State, 57 Md.App. 156, 167 , 469 A.2d 476, 482 , cert. denied, 299 Md. 656 , 474 A.2d 1345 (1984). Determining whether a state law has been preempted by federal law is ordinarily a question of “congressional intent.” Fidelity Federal Savings and Loan Assoc., et. al., v. de la Cuesta, et al., 458 U.S. 141, 152 , 102 S.Ct. 3014, 3022 , 73 L.Ed.2d 664, 674 (1982); see also, Barnett Bank N.A., v. Nelson, 517 U.S. 25, 30 , 116 S.Ct. 1103, 1107 , 134 L.Ed.2d 237, 243 (1996) (“[The preemption] question is basically one of congressional intent”); FMC Corp., v. Holliday, 498 U.S. 52, 56 , 111 S.Ct. 403, 407 , 112 L.Ed.2d 356, 363 (1990) (“in determining whether federal law preempts a state statute, we look to congressional intent.”); Malone v. White Motor Corp., 435 U.S. 497, 504 , 98 S.Ct. 1185, 1190 , 55 L.Ed.2d 443, 450 (1978) (“The purpose of Congress is the ultimate touchstone” of preemption analysis.) (quoting Retail Clerks Int’l Assoc. v. Schermerhorn, 375 U.S. 96, 103 , 84 S.Ct. 219, 223 , 11 L.Ed.2d 179, 184 (1963)). Moreover, ²¹¹ “[f]ederal regulations have no less pre-emptive effect than federal statutes. Where Congress has directed an administrator to exercise his discretion, his judgments are subject to judicial review only to determine whether he has exceeded his statutory authority or acted arbitrarily.

United States v. Shimer, 367 U.S. 374, 381-382 , 81 S.Ct. 1554 , 6 L.Ed.2d 908 (1962). When the administrator promulgates regulations intended to pre-empt state law, the court’s inquiry is similarly limited: ‘If [his] choice represents a reasonable accommodation of conflicting policies that were committed to the agency’s care by the statute, we should not disturb it unless it appears from the statute or its legislative history that the accommodation is not one that Congress would have sanctioned. Id. at 383 , 81 S.Ct. 1554 .’ “ de la Cuesta, supra, 458 U.S. at 153-154 , 102 S.Ct. at 3022-3023 , 73 L.Ed.2d at 675 . When reviewing the preemptive effect of federal regulations on state laws, a court must not confine its inquiry to whether Congress intended to preempt state law.

Rather, the appropriate inquiry, the Court instructs, considers whether the administrative agency intended to preempt state law and whether the action taken was within the delegation of authority by Congress. Id., at 154 , 102 S.Ct. at 3023 , 73 L.Ed.2d at 676 . In this case, we are concerned with Congressional intent in enacting the HOLA and the intent of the OTS, the federal agency charged with administering the HOLA, when it promulgated the regulations to implement that act. The HOLA was enacted by Congress largely in response to the effect the Great Depression had on the national housing market.

See generally, Glendale Federal Savings & Loan Assoc. v. Fox, 459 F.Supp. 903, 908 (C.D.Cal.1978). Its purposes were: “ ‘To provide emergency relief with respect to home mortgage indebtedness, to refinance home mortgages, to extend relief to the owners of homes occupied by them and who are unable to amortize their debt elsewhere, to amend the Federal Home Loan bank Act, to increase the market for ²¹² obligations of the United States and for other purposes.’ Preamble, 48 Stat. 128 (1933).” A significant component of HOLA was the creation of a “system of federal savings and loans associations.” Id. at 909 . Rather than subject the operation of federal savings and loans associations to state regulation, much of which was “ill-advised” and the object of the remedial legislation, Congress created the Home Owners’ Loan Corporation, the predecessor of the Office of Thrift Supervision, id. at 908 , and “gave the Bank Board plenary authority over the creation and operation of federal associations.” Id. at 909 . See § 5(a), which provides: “In order to provide local mutual thrift institutions in which people may invest their funds and in order to provide for the financing of homes, the Board is authorized, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of associations to be known ‘Federal Savings and Loan Associations”, and to issue charters therefor, giving primary consideration to the best practices of local mutual thrifts and home-financing institutions in the United States. 12 U.S.C. § 1464 (a).” Thus, “Federal savings and loan associations were not to be operated and regulated by what a particular state conceived to be the ‘best practices.’ Rather, the Bank Board was delegated by Congress the authority to select from the prevailing practices in all states what it deemed the best practices and to prescribe a nationwide system of operation, supervision, and regulation which would apply to all federal associations.” Glendale Federal, 459 F.Supp. at 909 .

Comprehensive rules and regulations have been adopted by OTS and its predecessor agency concerning the “powers and operations of every Federal savings and loan association from its cradle to its corporate grave.” de la Cuesta, supra, 458 U.S. at 145 , 102 S.Ct. at 3018 , 73 L.Ed.2d at 669 , citing California ²¹³ v. Coast Fed. Sav. & Loan Ass’n, 98 F.Supp. 311, 316 (S.D.Cal. 1951). Critically important to the analysis that governs the dispute sub judice is, as we have seen, 12 C.F.R. § 560.2 (2002), 7 promulgated by the OTS. Section (a) of the regulation makes clear that OTS intended to occupy the “entire field of lending regulations for federal ²¹⁴ savings associations” and that the regulations it promulgated would preempt state laws, defined as “any state statute, regulation, ruling, order or judicial decision,” affecting operation of federal savings associations “when deemed appropriate to facilitate the safe and sound operation of federal savings associations to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further other purposes of the HOLA.” The kinds of laws preempted are illustrated in section (b), including those purporting to impose requirements regarding the terms of credit and disclosure and advertising. See 12 C.F.R § 560.2(b)(4) and 12 C.F.R. § 560.2 (b)(9).

Section (c) exempts from preemption those state laws that only incidentally affect lending operations or that are consistent with section (a)’s purpose of “giv[ing] federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation.” Subtitle 9, the Maryland statute at issue in the case, contains the “Credit Grantor Revolving Credit Provisions.” The term “Revolving credit plan” is defined to “mean a plan that contemplates the extension of credit under an account governed by an agreement between the credit grantor and a borrower under which: “(1) the credit grantor permits the borrower and, if the agreement governing the plan permits, persons acting on behalf of or with the authorization from the borrower to make purchases or obtain loans from time to time; “(2) The amounts of purchases and loans are charged to the borrower’s account; “(3) The borrower is required to pay the credit grantor the amounts of all purchases and loans charged to the borrower’s account under he plan but has the privilege of paying amounts due from time to time as agreed; and “(4) Interest or finance charges may be charged and collected by the credit grantor from time to time on the amounts due under the plan.” ²¹⁵ Md.Code (1975, 2000 Repl.Vol.), § 12-901(e) of the Commercial Law Article. Additional statutory provisions in Subtitle 9 provide explicit directives for the regulation of revolving credit plans in the State of Maryland, including, without limitation, variation in interest rates, the amount of fees and charges that may be imposed, and procedures for amending revolving credit plans. Because they impact how credit grantors may operate and conduct their lending activities, which is inconsistent with OTS’s expressed intention to “occupy the entire field of lending regulation for federal savings associations,” any attempt to enforce these provisions as a matter of State law and as additional requirements of a credit agreement with a federal savings association must fail. The appellees appropriately conceded that Subtitle 9 qua Subtitle 9 is preempted. 8 Notwithstanding the concession, the appellants pursue the appellees on a breach of contract theory.

The issue that must be resolved, therefore, is whether the cause of action, or at least, the basis for the claimed breach, is preempted. The cause of action is not preempted. The OTS regulations expressly exempt from preemption “contract and commercial law ... that ... only incidentally affeet[s] the lending operations of Federal savings associations or [is] otherwise consistent with” the purpose of the regulations. 12 C.F.R. § 560.2 (c). That intention was confirmed in 61 Fed.Reg. at 50966: “OTS wants to make clear that it does not intend to ²¹⁶ preempt basic state laws such as state uniform commercial codes and state laws governing real property, contracts [or] torts____” See also Derenco, Inc. v. Benjamin Franklin Fed eral Savings & Loan Ass’n, 281 Or. 533 , 577 P.2d 477, 481-88 , cert. denied, 439 U.S. 1051 , 99 S.Ct. 733 , 58 L.Ed.2d 712 (1978) (applying state common-law restitutionary principles to loan-related activities of federal lenders); Fenning v. Glenfed, Inc., 40 Cal.App.4th 1285, 1295-99 (1995), review denied, 1996 Cal.

LEXIS 1870 (1996) (suit against a federal thrift for fraud and unfair business practices not preempted by HOLA nor its implementing regulations); People ex rel Sepulveda v. Highland Federal Savings & Loan, 14 Cal.App.4th 1692, 1708 , 19 Cal.Rptr.2d 555 , cert. denied, sub nom. Highland Fed. Sav. & Loan Ass’n v. California, 510 U.S. 928 , 114 S.Ct. 338 , 126 L.Ed.2d 282 510 U.S. 928 , (1993) (“we have found no provision of HOLA nor any particular regulation, and none have been cited to us, which expressly preempt the statutory action by the People for unfair business practices and the causes of action by the tenant plaintiffs for fraud, RICO violations, etc.”); Siegel v. American Savings & Loan Ass’n, 210 Cal.App.3d 953 , 258 Cal.Rptr. 746, 748-53 (1989) (suit based on a variety of state-law claims, including unfair competition, breach of contract, and breach of agency duty, permitted against federal lender); Konynenbelt v. Flagstar Bank, 242 Mich.App. 21 , 617 N.W.2d 706, 712-14 (2000) (HOLA does not preempt common-law tort and contract claims); Flanagan v. Germania, F.A., 872 F.2d 231, 234 (8th Cir.1989) (claim for tortious interference with contract not preempted by HOLA); Tuxedo Beach Club Corp. v. City Federal Savings Bank, 749 F.Supp. 635, 648 (D.N.J.1990) (private right of action under state consumer protection law not preempted by HOLA);. Morse v. Mutual Federal Savings & Loan of Whitman, 536 F.Supp. 1271, 1280-81 (D.Mass.1982) (“[t]he fact that federal statutes or regulations covering some aspects of a regulated area are, by necessity, complex and detailed, does not imply that Congress intended to occupy the entire field to the exclusion of state law”). ²¹⁷ Nor is a federal lenders’ contractual undertakings preempted. The OTS regulations indicate that OTS “occupies the entire field of lending regulations for federal savings associations.” In that regard, they provide that, consistent with OTS’s intent “to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation,” a federal savings association may extend credit as authorized under federal law ... without regard to state laws purporting to regulate or otherwise affect their credit activities.” Thus, the regulations apply only to State law, which they define as including “any state statutory regulation, ruling order or judicial decision.” § 560.2(a).

See 61 Fed.Reg. 50591 at 10 (“the terms of the ... loan should be a matter of contract between the savings association and the purchaser”). Wolens, 513 U.S. 219 , 115 S.Ct. 817 , 130 L.Ed.2d 715 , is instructive on this point. In Wolens , the United States Supreme Court addressed the preemptive effect of the Airline Deregulation Act of 1978(ADA), 49 U.S.C.App. § 1305, 9 on state-imposed regulation of the airline industry. There, the plaintiffs, participants in American Airlines’ frequent flyer program, AAdvantage, sued the Airline, challenging the retroactive application to them of modifications the Airline made to the program in 1988. 513 U.S. at 224-25 , 115 S.Ct. at 822 , 130 L.Ed.2d at 723 (describing American Airline’s AAdvantage modifications which included the imposition of capacity controls and black ²¹⁸ out dates).

Acknowledging and conceding the right of the Airline to change the terms and conditions of the program, the plaintiffs there complained that the application of the program modifications retroactively devalued the credits they had already earned and, thus, violated the Illinois Consumer Fraud and Deceptive Business Practices Act and was a breach of the Airline’s contract with them. Id. at 225 , 115 S.Ct. at 822 , 130 L.Ed.2d at 723 . The Supreme Court of Illinois denied the plaintiffs the injunction they sought, holding that to issue one would be a regulation of the Airline’s current rendering of service, but, opining that “only those State laws and regulations that specifically relate to and have more than a tangential connection with an airline’s rates, routes or services” are preempted, allowed their breach of contract and consumer actions to proceed. Id at 225, 115 S.Ct. at 822 , 130 L.Ed.2d at 724 .

Having reconsidered that decision in light of the intervening decision in Morales v. Trans World Airlines, Inc., 504 U.S. 374 , 112 S.Ct. 2031 , 119 L.Ed.2d 157 (1992), 10 as instructed by the United States Supreme Court, the Illinois court reconfirmed its earlier decision validating the consumer and contract actions. The Supreme Court addressed the actions separately. It held that the consumer action was preempted. Wolens, 513 U.S. at 228 , 115 S.Ct. at 824 , 130 L.Ed.2d at 725 .

Using the National Association of Attorneys General’s guidelines, invalidated in Morales , as a standard, the Court observed: “the Illinois Consumer Fraud Act serves as a means to guide and police the marketing practices of the airlines; the ²¹⁹ Act does not simply give effect to bargains offered by the airlines and accepted by airline customers. In light of the full text of the preemption clause, and of the ADA’s purpose to leave largely to the airlines themselves, and not at all to States, the selection and design of marketing mechanisms appropriate to the furnishing of air transportation services, n4 we conclude that § 1305(a)(1) preempts plaintiffs’ claims under the Illinois Consumer Fraud Act.” Wolens , 513 at 228, 115 S.Ct. at 823-824 , 130 L.Ed.2d at 725 . It agreed with the Airline, “Congress could hardly have intended to allow the States to hobble [competition for airline passengers] through the application of restrictive state laws.” Id. at 228 , 115 S.Ct. at 824 , 130 L.Ed.2d at 735-726 . The Court reached the opposite result with respect to the contract action.

It reasoned: “We do not read the ADA’s preemption clause, however, to shelter airlines from suits alleging no violation of state-imposed obligations, but seeking recovery solely for the airline’s alleged breach of its own, self-imposed undertakings. As persuasively argued by the United States, terms and conditions airlines offer and passengers accept are privately ordered obligations “and thus do not amount to a State’s ‘enactment or enforcement [of] any law, rule, regulation, standard, or other provision having the force and effect of law' within the meaning of [§ ] 1305(a)(1).” ... Cf. Cipollone v. Liggett Group, Inc., 505 U.S. 504, 526 , 112 S.Ct. 2608 , 120 L.Ed.2d 407 (1992) (plurality opinion) (“[A] common-law remedy for a contractual commitment voluntarily undertaken should not be regarded as a ‘requirement ... imposed under State law ’ within the meaning of [Federal Cigarette Labeling and Advertising Act] § 5(b).”).

A remedy confined to a contract’s terms simply holds parties to their agreements — in this instance, to business judgments an airline made public about its